Jefferson County in Alabama, where Birmingham is, wants Wall Street creditors to ease the conditions of their financial swaps in a desperate attempt to avoid bankruptcy.
While it seems that some stinky stuff might have gone on here, the real problem is that too many municipalities bought exotic securities without really understanding the risk involved. But that said, Jefferson County really pushed it to the max.
The county ended up with 18 different swaps at one point, an extraordinary number for a county government. The notional value of the swaps surpassed the value of the bonds they were supposed to hedge.